Avaada Energy Secures Green Financing of $143 Million for New Solar Project in Gujarat

Avaada Energy has secured  USD 143 million in green financing from India’s largest public sector lender, the State Bank of India (SBI). This financing will support the development of a 400 MW utility-scale solar PV power project in Gujarat. This project underlines Avaada’s commitment to expanding its footprint in renewable energy projects in India.

Gujarat Urja Vikas Nigam Limited (GUVNL) will purchase all of the project's generated power. This landmark transaction marks Avaada’s first endeavor in developing a greenfield project under a Special Purpose Vehicle (SPV) that already possesses an operational project.

This strategic arrangement will enable the organization to optimize its capital structure and simplify the ownership structure of its project subsidiaries, demonstrating Avaada’s approach to managing and expanding its renewable projects across India.

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The project finance from SBI was sanctioned and disbursed as a 20-year project loan facility, which was obtained at competitive terms.

Commenting on the significant development, Mr. Vineet Mittal, Chairman of Avaada Group, said, “We are delighted to strengthen our relationship with the State Bank of India through our project financing agreement. This partnership not only reflects our strategic vision to build a diverse and high-quality portfolio of energy transition assets but also highlights the trust and commitment of leading financial institutions to support renewable energy projects with stable, long-term cash flows.”

What are special-purpose vehicles?

A Special Purpose Vehicle (SPV), also referred to as a Special Purpose Entity (SPE), is a division that a parent company establishes to isolate financial risk. It’s a separate legal entity with its own assets and liabilities, as well as its own legal status. Key characteristics of SPVs include:

Risk Isolation: SPVs are often created to undertake risky projects while protecting the parent company from the most severe risks of failure.

Asset Securitization: SPVs may be created solely to securitize debt so that investors can be assured of repayment.

Legal Status: Its legal status as a separate company makes its obligations secure even if the parent company goes bankrupt.

Financial Transparency: The financials of an SPV may not appear on the parent company’s balance sheet as equity or debt. Instead, its assets, liabilities, and equity will be recorded only on its own balance sheet.

SPVs are used in various financial transactions, including securitizing assets, creating joint ventures, isolating corporate assets, and more. Venture capitalists also use them to assemble a pool of money to invest in a startup. However, if accounting loopholes are exploited, SPVs can become a financially devastating way to hide company debt.

Read: RWE Starts Construction of its First Solar Power Plant in Italy

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